For katetutors only, assignment due today/tomorrow
The net present value (NPV), as well as the future value (FV), formulas can be used to determine viability. They also take into account time values of money. These equations share similar inputs, including the initial investment amount and cash flows over time. But they have different outputs.
When calculating NPV, a positive number means that an investment will produce returns higher than its cost. A negative number indicates otherwise. If all cash flows have been received and invested, the FV formula shows the value of a sum.
Let’s say that you want 100 stock shares at $10 per each and receive $1 annually in dividends. These numbers, together with a 10% discount rate, would indicate that this investment is worthwhile. Your FV for five years would then be about $161.00. It would also suggest that it could be an opportunity to grow over the long-term.